Debt-crisis explained through tearful laughter

Australia's brilliant political satire team of Clarke and Dawe do a great job here in exposing the fundamental and terrifying ridiculousness of the Euro debt-crisis and the world's teetering economic state.

28 Responses to “Debt-crisis explained through tearful laughter”

There is a good answer to where the money should come from and it isn’t the public coffers.

The process went a bit like this:

1) Private corporations in Britain France and Germany invest in the member countries of the EU, often in spectacularly worthless investments many of them second and third order repackaging of some underlying assets.

3) EU member states on the periphery begin programs bailing out banks to increase liquidity further emptying public coffers.

So, the program? Private sector fucks up – public sector pays. Why should our publicly managed system be attacked because the private sector had a crisis? Well, because that’s capitalism.

The alternative is to expropriate the capital of the people who, through this whole process, have remained incredibly rich. They are directly attacking my living standards and I’m only making just less than the standard industrial wage. I say we cap wealth at 1 million.

Actually, that’s NOT capitalism. That’s fascism (ie, corporatism). The big companies / individuals own the government essentially. They are too intertwined to be allowed to fail, thus they are bailed out and private losses become public.

“Keynes argued that the solution to the Great Depression was to stimulate the economy (“inducement to invest”) through some combination of two approaches: a reduction in interest rates and government investment in infrastructure. Investment by government injects income, which results in more spending in the general economy, which in turn stimulates more production and investment involving still more income and spending and so forth. The initial stimulation starts a cascade of events, whose total increase in economic activity is a multiple of the original investment.[3]”

“Keynesâ€² theory suggested that active government policy could be effective in managing the economy. Rather than seeing unbalanced government budgets as wrong, Keynes advocated what has been called countercyclical fiscal policies, that is policies which acted against the tide of the business cycle: deficit spending when a nation’s economy suffers from recession or when recovery is long-delayed and unemployment is persistently highâ€”and the suppression of inflation in boom times by either increasing taxes or cutting back on government outlays. He argued that governments should solve problems in the short run rather than waiting for market forces to do it in the long run, because “in the long run, we are all dead.”[13]”

Secondly, Keynes didn’t give a free pass to spend as much as you possibly can, even if you don’t have it. Whenever you see instances of hyper inflation you are watching Keynesian reasoning being taken too far. Even the most ardent Keynesian supporters agree it is possible to spend too much and touch off a period of hyper inflation.

The problem with the EU, and especially PIGS is that they were spending too much even before the depression. Greece’s debt didn’t suddenly magically appear as a result of a recession. It was already there, it just became fatal when the economy went south. The problem for the EU isn’t just an economic downturn. If that was the only problem, some stimulus spending could arguably be the answer. The problem for the EU is debt combined with a flat economy. Keynes isn’t going to help you there.

The struggle now is to not tip into hyperinflation while at the same time not restricting spending so much that you start to kill of economic activity. When you have a nation like Greece where a large portion of economic activity is in the public sector, it makes walking that line more or less impossible. The only savings grace for Greece is that nations running more responsible fiscal policies (namely the Germans) can eat some of the cost of Greece’s irresponsibility.

Personally, if anyone got hosed in this whole deal it was the Germans. They made the hard decisions, ran a responsible budget, and paid the political price. Now, they have to turn around and bleed for Greece which hasn’t had a responsible budget since they became a democracy. The Germans are right to be pissed.

i read the later comments here over and over, and still i get nowhere. Best i can say is that to grasp any of it, one seem to need to rewrite how one is thinking. But then that, to me at least, borders on religion.

As always, there are 2 schools of thought on this. First, the moronic one which seems to be the one everyone in Europe and USA has adopted: “keep the debt growing because there is and never will be any consequences.”
The second, which I’ve viewed as crazy and paranoid but which seems less blatantly stupid, is to follow what China and Russia are doing: to start building up a defensive national strategy against the sudden catastrophic global economic collapse by shoring up precious metal reserves (mainly gold).
I hate to say it but the Chinese may be onto something here.

basically, debt based economies are fucked up beyond belief. They only appear to work as long as the workforce in activity keeps growing alongside the debt, so that said workforce can be taxed to cover the interest (and who that interest is being payed to is a question all its own).

… debt based economies are fucked up beyond belief. They only appear to work as long as the workforce in activity keeps growing alongside the debt, so that said workforce can be taxed to cover the interest (and who that interest is being payed to is a question all its own).

They do a pretty good job nailing why I look at the fiscal horror that is the EU and shudder. Every time I hear about another EU country basically grinding to a halt as strikes and protesters freak out over austerity measures, I count my blessings that the US didn’t charge blindly down that path.

Not that the US is in vastly better shape. The US is better off only in that they have vastly fewer people completely reliant on government payments than the PIGS. The US still has a very large debt, basically 0% interest, and are spending money at an absurd rate. All the ingredients for inflation there. The very idea of the US dollar entering an large inflationary phase should cause world wide economic terror.

When Nassim Taleb is betting on hyperinflation in the US dollar, it scares me more or less shitless.

These guys always nail it. The only answer that maintains the current levels of global demand amidst unpayable debt seems to be more debt. I can see this whole planet having a structural adjustment plan imposed on it by the Interstellar Monetary Fund one day.

Well, maybe no breeding for starters, till we’ve proved we can live in our means. And our assets would be sold at bargain-basement prices to rapacious Andromedan investors, while our labour environment and environment laws are lowered to the lowest standards in the universe. So pay that goddamn visa debt!